Monetary Transmission, Ownership And Crisis: How Robust Is The Indian Evidence?

Author(s) Jugnu Ansari, Saibal Ghosh

ABSTRACT

Employing data for the period 2001-2014, the paper investigates the lending and loan pricing behavior of public and private banks to monetary policy. Three major findings emerge. First, while both the interest rate and the bank lending channel are relevant, there is a trade-off: the impact of the former is much higher as compared to the latter, although it occurs with a significant lag. Second, we find that private banks exhibit a much larger reaction to monetary policy shock under the interest rate channel whereas public banks show larger response under the bank lending channel. And third, state-owned banks cut back lending during periods of crisis, although no such behavior is in evidence for private banks.